The Shanghai port serves as the most important
gateway of China to the world. Traffic through the Shanghai port
is growing rapidly, particularly in the field of container transport.

Statistics show that Container throughput at the Shanghai port
grew a massive 35.8% to 8.613 million twenty-feet equivalent units
(TEU) in 2002, accounting for 23.3% of China's total (37 million
TEU). This made Shanghai the world's fourth largest container
port, overtaking Kaohsiung
(Taiwan), which handled 8.49 million TEU of containers last year,
while Hong Kong, Singapore and Pusan (South Korea) still keep
their positions as the world' s top-three container handling ports.

1.2. Capacity of Shanghai Port Still Relatively Low

Although Shanghai has made big progress in the field of port
infrastructure, the city's container-handling capacity still failed
to meet the fast growing demand. According to the Shanghai Port
Administration, container numbers passing through Shanghai port
have grown by an average of 27% annually over the past decade.
This increase is based on the rapid development of foreign trade
in the Yangtze delta area as well as the vast hinterland. Imports
and exports through the Shanghai port in value terms grew 18.3%
in 2002, to a record 142.5 billion USD, accounting for about a
quarter of the country's total foreign trade volume.

On the other hand, Shanghai's container-handling facilities basically
remain backward. The Shanghai port is not only short of large
deep-water berths but also short of modern logistics, which provide
quick, reliable, flexible and comprehensive services.

The Huangpu River - the Mother River of Shanghai - is narrow
and quite shallow, with a depth of only about 7 meters, preventing
container ships of 1,400 TEU or more from entering the port. Big
boats have to wait for the up-tides to enter and leave Shanghai
port, severely hindering the competitiveness of the port in a
global market.

The Shanghai government has thus made great efforts to improve
the capacity of the Shanghai port. The Waigaoqiao deepwater project,
which was started in 1993, is one of the largest port constructions
in Shanghai. The goal of the project is to create a harbour area
of 1.63 square kilometres with a depth of 13 meters, capable for
accommodating four container ships (each carrying 4,000 TEU) at
the same time. The project, however, still needs time to be completed
and questions remain over the feasibility of maintaining a 13-metre
depth due to the silting of the river.

Under these circumstances, the construction of a mega-deepwater
port became a "must" for Shanghai, providing a long-term
and final solution to fulfil the ambitious goals of the city to
become a key navigation hub in Asia.

The planned project of Shanghai deepwater port includes three
main parts - the Yangshan Deepwater Port, the Donghai Bridge and
the Luchao New Harbour City, as follows:

2. The Yangshan Deepwater Port

2.1. Location of the Port

Shanghai has no suitable place in its own area to meet the demands
of such a harbour. After six years of feasibility studies, the
islands of Xiao Yangshan and Da Yangshan in the Hangzhou Bay,
27.5 kilometres from Shanghai's southern coast, and under the
jurisdiction of the neighbouring Province Zhejiang, was chosen
as the site of the deepwater port of Shanghai. The project enjoys
a strong backing by the central government of the People's Republic
of China.

The average water depth in the area of the islands is over 15
meters. The geographic and geological structure is stable as well
if compared to the sea chart of today and that of 100 years ago.

2.2. Construction Plan of the Port

The first phase of the Yangshan Deepwater Port construction started
in the middle of 2002. It will be completed by 2005. A land area
of 1.53 square kilometres, equipped with a storage yard of 720,000
square meters and 15 container cranes will be built in the first
phase. This phase will also see the first five container berths
from Xiao Yangshan Islands to Huogaitang with a 1600-meter quay
waterfront. The designed water depth of the channels will be about
15.5 meters, capable of accommodating the fifth and sixth generation
of container ships. Each berth was designed to handle 440,000
TEU per year. The total annual handling capacity will therefore
reach 2.2 million TEU, which should meet the fast growing demand
of Shanghai Port in the mid-term future.

According to the master plan, the whole project will be completed
by 2020. At that time, the man-made area will increase to 18 square
kilometres and the deepwater coastal line will reach 22 kilometres.
More than 50 container berths, capable of handling the fifth and
the sixth generation of container ships (5,000-6,000 TEU) will
be built. The annual handling capacity of the deepwater port will
increase to around 25 million TEU, probably making it the biggest
- and busiest - container terminal in the world.

2.3. Financing of the Project

The budget for the first phase was approved to be 14.31 billion
RMB (1.73 billion USD), but no final budgetary target has been
announced for the whole project.

The developer of the port is the Shanghai Tongsheng Investment
(Group) Co. Ltd, which is owned jointly by the Shanghai International
Group Co. Ltd (52%), the Shanghai Port Administration and the
Shanghai State-owned Assets Operation Co. In June 2002, the Shanghai
Tongsheng Investment (Group) Co Ltd. was offered 7.5 billion RMB
(907 million USD) in loans for the first-phase construction by
a consortium of five domestic banks (China Construction Bank,
the State Development Bank, the Bank of China, the Industrial
and Commercial Bank of China, and the Shanghai Pudong Development
Bank). A larger consortium made up of those five banks and five
other lending institutions also signed a deal in June 2002, providing
a 17 billion RMB (2.06 billion USD) credit line for the port construction
up to the year 2020.

Foreign investors are allowed to own stakes of as much as 75%
in port projects according to China's agreement with the World
Trade Organisation (WTO). Hutchison International Ports Ltd.,
PSA Corp. of Singapore, P&O Nedlloyd Container Line Ltd.,
Modern Terminals Ltd. (controlled by Wharf Holdings Ltd.) and
other international companies have shown their interests in joining
the port project. The Shanghai government, however, has not taken
any decisions so far.

The considerations of the port-policy makers seem to be that
they want to rely on themselves at first for the basic work of
the port construction. In the later phases, they will probably
seek partners or co-operators in order to attract more capital
and the most advanced techniques and management for handling the
port. This consideration is not only due to optimistic marketing
estimations, but also due to the strategic importance of the project
for the national economy of China.

3. The Donghai Bridge

The long bridge, standing in the northern part of Hangzhou Bay
and linking the deepwater port with the mainland, was named "Donghai
Bridge". The bridge construction has already begun with the
underwater foundations and should be finished by 2005, during
the first phase of the port project. Different services like container
distribution, water and power supply and communications to the
island port will be provided through this bridge.

According to the plan, the sea-crossing bridge will be 31.3 kilometres
long and 31.5 meters wide, with six highway lanes. The bridge
has one main span (a box girder cable-stayed bridge with two towers)
with a 40-meter clearance for 5,000-tonnage vessels, one side
span for 1,000-tonnage vessels and 2 side spans for 500-tonnage
vessels. The annual navigable capacity under the bridge will be
over 5 million TEU.

4. The Luchao New Harbour City

Designed as one of 11 satellite towns in the new round of Shanghai
urban planning, Luchao Harbour City is situated in the south-east
corner of Nanhui District, about 30 kilometres away from the island
Yangshan Port, 55 kilometres from downtown Shanghai, 30 kilometres
from Pudong international airport and 10 kilometres from Shanghai's
outer expressway.

Luchao Harbour City will be built in high standard as a world-ranking
modern harbour city. Based on the Master Plan by Von Gerkan, Marg
und Partner, Architects (Hamburg), adopted by Shanghai Municipal
Government, it will be a combination of European style and "Shanghai-style"
and also bear the characteristics of a southern Chinese town.

Focusing on water, the design defined the city as an ecological
and coastal city with a maritime culture. In the centre of the
new harbour city, there will be a large circular lake basin with
a diameter of almost 2.5 kilometres. The city extends radially
from this freshwater lake and concentrically into the coastal
area penetrated by water canals.

The plan of Luchao Harbour City includes three urban rings. The
first ring around the lake will be a belt of administrative, commercial
and cultural facilities. The second ring is a green corridor decorated
by flowers and trees. The outer ring is planned as a residential
area complemented with shops, restaurants, clinics and schools.
Outside the outer ring, a modern traffic system will link the
new harbour city with the expressway network of Shanghai.

The new harbour city will be the administrative centre of Nanhui
District and the rear basis of the deepwater port, bearing comprehensive
functions including container distribution and storage, offshore
processing, shipping market, logistic centre, residence, financial
and commercial services, amenity and tourism. A yacht club and
a series of large cultural facilities including theatre, maritime
museum, aquarium, etc. will be established on the two islands
in the lake.

The first phase of the city construction began last year and
will be finished by 2005. The number of inhabitants in the city
at that time is expected to be 80,000 -100,000. In about 20 years
the city will host a population of 300,000 inhabitants.

The Shanghai New Harbour City Investment & Development Co.,
Ltd. was founded by the Shanghai Tongsheng Investment (Group)
Co. Ltd. and the Nanhui Land Reservation Centre in April 2002,
with a registered capital of 1.3 billion RMB (157 million USD)
and the responsibility for the development of the harbour city.

The above-mentioned projects, together with the existing Pudong
international airport and the forthcoming highway, railway and
magnetic suspended train, present a picture of a huge logistic
centre in the near future on the east wing of Shanghai, reflecting
Shanghai's dynamic growth and self-assertiveness in a world economy
in which China is going to take an ever growing place.